Studies: music industry overstating threat of P2P piracy

File-sharing over P2P networks has been public enemy number one for the music …

Unauthorized sharing of digital music remains a huge issue for the global music business, but is most of that sharing taking place on peer-to-peer networks? For years, peer-to-peer was the bogeyman, the red Communist music monster than was going to devour the industry's revenues. But new research suggests that sneakernets may be as big a problem as darknets.

A recent study from the NPD Group found that legal music downloads surged in 2006, and the company predicts that legal services will have more users than peer-to-peer networks by the end of 2007. But that doesn't mean the music industry isn't threatened. "Unfortunately for the music labels," said Russ Crupnick, vice president and entertainment industry analyst for the NPD Group, "the volume of music files purchased legally is swamped by the sheer volume of files being traded illegally, whether on P2P or burned CDs sourced from borrowed files."

Note the reference to "burned CDs." The EFF points out that NPD thinks this sort of old-fashioned sharing is actually a massive threat. According to NPD, "The 'social' ripping and burning of CDs among friends—which takes place offline and almost entirely out of reach of industry policing effort—accounted for 37 percent of all music consumption, more than file-sharing."

If true, that's a huge number. So why aren't we hearing more about CD swapping from the RIAA? For one thing, lending a CD to a friend is not illegal, and it's all but impossible to keep people from ripping borrowed CDs. Hence, the RIAA's focus has largely been on peer-to-peer sharing instead, with the music industry going so far as to pressure colleges to cut off all peer-to-peer access. This level of attention to peer-to-peer networks makes less sense if CD swapping and ripping is actually a bigger issue.

Regular readers might remember our coverage of Media Rights Technologies, which threatened Apple, Microsoft, Adobe, and Real in early May, claiming that the companies were not using enough DRM. MRT claims that, based on internal studies, streamripping (saving the bitsream from Internet radio or other streaming services) is actually the number one source of infringing copies. I spoke with MRT CEO Hank Risan last week, and he confirmed the claim, saying that streamripping was also one of the reasons behind the recent decision to raise rates on Internet webcasters. (The company has said that it would file lawsuits against Apple, Microsoft, Adobe, and Real within 10 days if they did not license MRT technology; 20 days later, there has been no announcement).

If streamripping truly is a bigger threat than CD-swapping and P2P use, it must account for at least 38 percent of all music consumption, leaving only a maximum of 25 percent for both legal and P2P acquisition of music. If true, it seems downright amazing that the music industry has spent so much time focused on peer-to-peer file-sharing.

Or perhaps it's not all that amazing. A more likely explanation is that the numbers aren't even right. As Canadian law professor Michael Geist showed a few weeks ago, claims about piracy rates can be wildly variable and downright fictional. High numbers are often used to support legal threats or calls for Congressional action, as in the MRT case. MRT has a lot to gain by overstating the threat of streamripping and, so far, has not showed its numbers. Both MRT and NPD agree, though, that P2P is hardly the music industry's biggest problem.